Vaccines are Here – Can Higher Interest Rates be far behind?
How Long Can Interest Rates Stay Low Once Vaccines Arrive?
The announcements, two so far this month, about a vaccine for Covid-19 have taken markets by storm. When news broke that drug makers, Pfizer and Moderna had COVID-19 vaccine breakthroughs that appeared 90-94.5 % effective, the Dow Jones industrial average soared and the Toronto market also took off. Canadian oil and gas shares shot up with the prospect of people once again taking road trips and climbing aboard planes. The price of oil rose 10 %.
2019 Arrival of Corona-virus - Bank of Canada Cut Interest Rates
To help the economy struggle through the COVID-19 crisis and lockdown, Bank of Canada governor Tiff Macklem, cut rates by 50 bps to 1.25 % on March 4th 2020, bringing borrowing costs to the lowest since June 2018. It is the first time since March 2009 that the central bank slashed rates by 50bps.
Good News is Bad News for Borrowers
If you are thinking of buying a home, good news is often bad news for you, the 'Borrower'. According to Macklem, central bankers may not be thinking about hiking rates soon but a sudden surge of optimism that the pandemic is over, which has until now felt endless, could mean that borrowers must at least think about the idea that rates will not stay near zero forever.
Fixed Rate or Variable Rate - Time to Talk with Your Mortgage Broker
You may be considering what a victory over COVID-19 will mean for the mortgage rates you now pay. Traditionally the variable rate mortgage averaged lower than the fixed rate but over the next 5 years the opposite could be true. You may consider this a time to lock in your mortgage.
Next Monetary Policy Report, MPR
The next scheduled date for announcing the overnight rate target is December 9, 2020 with a full update of the Bank's outlook for the economy and inflation, including risks to the projection, expected January 20, 2021.
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